It's a hard knock (off) life

The Supreme Court has handed down judgment in an interlocutory appeal in R v M and others[1] which dealt with, amongst other things, the construction of section 92(1) of the Trade Marks Act 1994 (the "Act"). This section of the Act outlines the criminal offences and sanctions for unauthorised trade mark use.

The Court of Appeal's decision[2] was the subject of a previous briefing note which can be found here.

Background

A detailed background to the case can be found in our previous briefing note, but the salient points are repeated here for convenience.

It is alleged that the appellants' business involved the bulk importation and sale of assorted items of clothing bearing the registered trade marks of different well-known brands including Ralph Lauren, Adidas and Fred Perry. The clothing included a mixture of counterfeit goods, these being goods that had been manufactured without the registered trade mark owners' consent, and 'grey' goods, these being goods that had been manufactured with the registered trade mark owners' consent, but where the importation and sale of such goods into the EU had not been authorised.

The appellants were appealing the Court of Appeal's decision that the sale of grey goods could constitute a criminal offence under section 92(1) of the Act. The appellants hoped that the Supreme Court would draw a distinction between grey goods and counterfeit goods.

Criminal offence

Section 92 of the Act outlines the criminal offences relating to the unauthorised use of a trade mark in certain situations. The relevant sections of the Act detailing the criminal offences which are the subject of this appeal are outlined below:

Setion 92(1) - A person commits an offence who with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the proprietor:

a) applies to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark, or

b) sells or lets for hire, offers or exposes for sale or hire or distributes goods which bear, or the packaging of which bears, such a sign…

On indictment, the offences carry a maximum sentence of up to 10 years' imprisonment.

Focus of appeal

The focus of the appellants' appeal was on the correct interpretation of the wording in section 92(1)(b) and, in particular, "such a sign".

The appellants argued that "such a sign" linked back to the sign described in section 92(1)(a) and that, because it linked back to section 92(1)(a), the offence in section 92(1)(b) only covered goods to which the sign had been applied without the trade mark owner's consent.

Accordingly, as the grey goods had been manufactured with the consent of the trade mark owner, they should fall outside the scope of section 92(1)(b).

The Court held that, whilst the wording "such a sign" did link back to section 92(1)(a), the wording in the preceding section "without the consent of the proprietor" was not incorporated when interpreting "such a sign" under section 92(1)(b).

Accordingly, if goods have been imported and sold in the EEA without the trade mark owner's consent, an offence shall have been committed regardless as to whether the goods were originally manufactured with the trade mark owner's consent. Such a decision confirms that the sale of grey goods is covered by section 92(1) of the Act.

Comment

The Supreme Court's decision affirms the earlier decision of the Court of Appeal that dealing in grey goods can give rise to criminal sanctions as well as civil remedies.

In light of the fact that the maximum penalty for dealing in grey goods is 10 years' imprisonment, this decision should:

Act as deterrent to would be dealers of grey goods.

Be a weapon available to brand owners as part of their enforcement strategy.

It remains to be seen what approach the criminal courts will take when sentencing parallel importers and the resellers of grey goods.

Considering that grey goods are still genuine products, a sentence of 10 years' imprisonment would in most circumstances seem unduly harsh, especially considering it is the same maximum penalty as dealing in counterfeit goods, which were never manufactured by or with the approval of the trade mark owner.

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